Why You Need An Organizational Health Strategy
The term organizational health is a fascinating metaphor. Health is an attribute originally describing a person’s state of being as whole and sound. That’s a state that company leaders seek for their businesses, since effective performance standards and practices are likely to promote holistic success.
In the ecosystem of the human body, we perform practices to manage a variety of interrelated systems; the physical system comprised of organs, muscles and tissue, as well as our mental and energetic/spiritual systems. Just as with our physical health, where we have tools that can restore us to stasis, business health can be influenced by our intentional behavior.
Everything waxes and wanes. Even top performers have days or weeks where productivity is not at its peak. When looking at the organization as a whole, there are intentional practices that you can put in place to ensure that isolated, temporary flaws don’t become permanent or systemic problems.
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Below are a couple of articles that not only invite you to focus on organizational health, they also claim that it’s the most important element for business leaders to focus on.
1) Organizational Health: The Ultimate Competitive Advantage
By Scott Keller & Colin Price
This article is an adaptation of Keller & Price’s 2011 book, Beyond Performance: How Great Organizations Build Ultimate Competitive Advantage. As you’ll read in the abstract of the more recent article below, their message is just as true today.
According to the authors, “focusing on organizational health—the ability of your organization to align, execute, and renew itself faster than your competitors can—is just as important as focusing on the traditional drivers of business performance”. Ultimate competitive advantage lies in creating a healthy ecosystem that can adjust to future contexts and challenges, and create a capacity to keep changing over time.
Think about your own body. If you keep getting sick, you can repeatedly take over-the-counter medications or even antibiotics for bacterial infections. Or you can create systems where your environments are clean, your diet is healthy, and you receive enough sleep and exercise.
In business this translates into creating core values, formulating growth plans for every quarter, and implementing periodic check-ins with all employees. According to the authors, organizational health can’t be a cut and paste strategy. Each organization has a particular history, specific competitors, a unique team constellation, and shared values that will influence how a healthy ecosystem is created.
Keller & Price define organizational health as “the ability of an organization to align, execute, and renew itself faster than the competition to sustain exceptional performance over time”. These are not hippy new-age management philosophies. Their research shows that half of a company’s long-term financial success is driven by its health.
They studied two groups at a large financial-services institution that were representative of the entire organization in terms of profit, customer economics, and branch characteristics. One group implemented a long-term sales stimulation program using traditional, performance-focused methods. The other utilized an approach for the same time period that balanced performance with health. Growth in the first group was 8%, while the other group had incredible 19% growth.
2) The Hidden Value of Organizational Health—and How to Capture It
By Aaron De Smet, Bill Schaninger, and Matthew Smith
The authors of this piece define organizational health as alignment around a clear vision, strategy, and culture, but also the capacity to deliver superior long-term financial and operational performance. This piece introduced research from an eight year study showing that healthy companies had 3x total shareholder returns, compared to companies not focused on health.
Over ten years the authors studied over 1.5 million employees at hundreds of companies, created a health index that showed how 37 distinct management practices drove nine distinct outcomes. They discovered four combinations of practices (recipes) in the healthiest companies reflecting distinct organizational approaches and management practices.
For example, the leader-driven recipe is represented by “the presence, at all of an organization’s levels, of talented, high-potential leaders who are set free to figure out how to deliver results and are held accountable for doing so.” These are highly-decentralized open and trusting cultures, where career opportunities are used specifically as a leadership development practice. The other three recipes are; market focused, execution edge, and talent & knowledge core.
Check out the full article to learn more about the recipes, how to align between strategy and health, and avoiding recipe killers.
Researching this topic proved quite difficult. I found few articles that covered the topic of organizational health, but their authors asserted that being health-focused is vital for long term success. This may be the best kept secret in business. Planning for team success, creating an action plan, and implementing regular communication are the keys to healthy organization that can success in today’s competitive landscape.
