It’s not enough to sell a great product or service to build a successful business. Profitable companies develop long-term strategies and short-term goals that their talent can execute. To do that requires having a healthy organization. And healthier organizations outperform their competition.
McKinsey & Company, a renowned global business consulting firm, has monitored the health of more than 1,500 companies across 100 countries for over a decade. The research involves collecting views of employees and management on actions taken to improve organizational health and has shown that those actions correspond with enhanced financial performance. Their findings demonstrate that companies who invest in and work on the company’s health exhibit significant performance growth in under 12 months, regardless of size or industry.
What is Organizational Health? Why is it Important?
Managing your organization’s health is as important as managing your P&L. It’s more than your company culture or employee engagement. Organizational health is when the company can align around a common vision, execute that vision and continue to evolve through innovation while maintaining that commitment to the vision. When monitored, organizational health can sustain the institution no matter the leader or circumstance. Employees perform better when a company is healthy, resulting in improved processes, innovation, increased revenue, long-term customers, and continued growth.
Think of high-performing athletes. They engage in all kinds of practices to improve and maintain their performance. Those drills help them perform in the most competitive and stressful environments, avoid injury, and lengthen their careers. It takes commitment and belief to achieve greatness. The same principles hold true for high-performing companies.
According to McKinsey, there are four “recipes” for organizational health:
- Leadership Factory – organizations drive performance by developing and deploying strong leaders, supporting them through coaching, formal training, and the right growth opportunities.
- Continuous Improvement Engine – organizations that gain their competitive edge by involving all employees in driving performance and innovation, gathering insights, and sharing knowledge.
- Talent and Knowledge Core – organizations can accelerate their performance by attracting and inspiring top talent.
- Market Shaper – organizations that get ahead through innovation at all levels, and use their deep understanding of customers and competitors to implement those innovations.
Organizations employing one of these four approaches may substantially increase their chances of improved health and profits.
The root of all four recipes is a commitment to clear and effective communication. Without the ability to communicate effectively, all efforts will fall short. To have a healthy organization, you must first take a hard and honest look at your internal communications.
You might think the communication within your organization is on point, but chances are there are ample opportunities for improvement. Are there silos within your organization? Do you sometimes feel the left arm doesn’t know what the right arm is doing? Are there locations/branches within your company that “get it” and those that don’t? Does it seem that you’re taking two steps back for every step forward? Or are you doing well, but know that if you could get everyone on the same page, you could be doing even better?
According to a study by The Economist Intelligence Unit, poor communication leads to 44% of projects missing scheduled deadlines, 31% low employee morale, 25% of missed performance goals, and 18% in lost sales. What is the most frequent communication barrier? The human condition: different styles of communication.
The impact of poor or ineffective internal communication is significant. So, what can company leaders do? When looking at your organization, consider the following:
- What training or coaching do you have in place for your leadership team surrounding communication?
- How transparent is your organization in sharing vision and strategy? That means across all departments, irrespective of job title or responsibility.
- Are communication skills measured as part of employee KPIs?
- How frequently does your organization engage in team-building activities focused on improving communication and developing trust?
While other elements contribute to the health of your organization, whatever impacts those other factors often points back to the effectiveness and clarity of communication.
You may think that organizational health sounds great but it seems like a heavy lift. Or perhaps you don’t see it as necessary to achieve short-term goals. Both thoughts are misguided. Rather than being a distraction, a focused health-improvement plan helps your company achieve short-term goals. And it’s easier than you think.
Working healthy is just doing what you’re already doing — just differently. The work involved is simply reshaping how your company connects, engages, and communicates with employees. Conveying your company’s vision inspires employees to act in its best interests. Most importantly, it’s about adopting a more innovative and effective style of leading, executing, and innovating. Committing to and working on your company’s health works, and it works quickly.