Time for a Check-Up: What’s the State of your Organizational Health?

Organizational health has been a hot topic in our post-pandemic era, but it’s nothing new. The concept cropped up over sixty years ago when W.G. Bennis coined the term in a paper he published while teaching at MIT.

In “Towards a ‘Truly’ Scientific Management: The Concept of Organization Health,” Bennis was the first to establish organizational health as a method of determining organizational performance, prompting many to call him a pioneer of leadership studies.

The esteemed organizational expert and author influenced many modern thought leaders, including Patrick Lencioni, who wrote The Advantage: Why Organizational Health Trumps Everything Else in Business. This important yet highly accessible book is considered by many to be an essential read for building world-class companies.

The Impact of Organizational Health

While Lencioni made the idea of organizational health popular, researchers at McKinsey were busy building the science that backs it up. Their decades-long studies spanning have proven that the topic is not theoretical or inapplicable. As the authors of the organization's recent article noted,

“McKinsey’s latest findings on organizational health demonstrate that it remains the best predictor of value creation and a sustainable source of competitive advantage in today’s global marketplace.”

The article states that continuously successful companies can ride out various forms of volatility. Organizational health is the vehicle taking them to the top.

Given its traction and the data, organizational health is clearly not a trendy buzzword or flavor-of-the-month idea. As various forms of turmoil affecting businesses continue to mount, leaders can’t afford to downplay this vital aspect of their companies.

The McKinsey team notes that organizational health makes companies better equipped for mergers and acquisitions, significant changes, and safety. Most importantly, their research shows that healthy companies are more profitable. They conclude:

“Organizational health can put companies on a fast track to performance—and a commitment to sustained health can keep them there.”

The Scope of Organizational Health

Organizational health begins with leadership. It is reflected in the short- and long-term impact of how CEOs make decisions, allocate resources, run day-to-day operations, and motivate their workforce. The McKinsey team believes that organizational health is made up of three components:

• How well the entire staff rallies around a common vision and strategy.
• How well the staff executes its strategy.
• How well the organization innovates and renews itself over time.

Writers for Talented Advisors point out that organizational health is the outcome of the mechanisms leaders implement to achieve goals. The quality of these systems dictates the company’s fitness. They stress that for a company to be healthy, the systems must be clear, coherent, transparent, equitable, and consistently implemented.

The systems leaders initiate and the behaviors they reinforce form their company’s culture. Coming full circle, the culture, or “how things are done around here,” is the barometer indicating an organization’s health. The behaviors that leaders intentionally instill in their team or that evolve by default dictate how well their strategy will be executed.

Sustained Organizational Health

Working to achieve and maintain organizational health is much like striving for personal fitness. To function at a high level, we determine what we need to do to meet our goals and then decide on the type and scope of improvements. It’s the same for companies.

The McKinsey team advises leaders aiming to improve their organization’s health to first assess their business’s current and aspirational areas of strength. When they’re ready to formulate a plan, they might consider Patrick Lencioni’s recommendation of dividing the process of achieving organizational health into four disciplines:

1. Build a cohesive leadership team.
2. Create clarity.
3. Overcommunicate clarity.
4. Reinforce clarity.

A COHESIVE LEADERSHIP TEAM

Lencioni asserts that a company can’t be healthy if its leadership team is not “behaviorally unified.” However, CEOs often underestimate what it takes to achieve leadership alignment, leading to dysfunction that trickles down through the ranks. Lencioni outlines five behavioral standards that leadership teams must rally around to get in sync:

• Building trust
• Mastering conflict
• Achieving commitment
• Embracing accountability
• Focusing on results

Lencioni stresses: “Leadership team members must see their goals as collective and shared when it comes to managing the top priorities of the organization.”

CREATE CLARITY

Creating clarity leads to alignment. Lencioni points out that companies usually fall short of alignment because the staff is unsure about what is expected.

“Within the context of making an organization healthy, alignment is about creating so much clarity that there is as little room as possible for confusion, disorder, and infighting to set in.”

Leaders own the responsibility of alignment, beginning with modeling it and forming a cohesive leadership team. To cascade alignment throughout their staff, Lencioni suggests leadership teams consider six questions:

1. Why do we exist?
2. How do we behave?
3. What do we do?
4. How will we succeed?
5. What is most important right now?
6. Who must do what?

Leadership must be in lockstep agreement about the answers to these questions to form goals and get their workforce to work cohesively.

OVERCOMMUNICATE CLARITY

After leadership team members are unified in their answers to the above questions, the next step is to convey these foundational points to their staff. To make sure they understand and buy into them, they need to do more than make an announcement or add the information to the employee manual. They must communicate these points repeatedly to get everyone rowing in the same direction. Like advertising, people must hear messages numerous times before internalizing and acting upon them.

Lencioni says:

“The only way for people to embrace a message is to hear it over a period of time, in a variety of different situations, and preferably from different people.”

He says great leaders consider themselves “Chief Reminding Officers,” helping to ensure that their employees constantly have company priorities at the forefront of their minds.

REINFORCE CLARITY

In addition to regularly reminding employees about the company’s focus, leaders should reinforce these points structurally. They can do this by intentionally designing processes that act as rebar for the messaging. This is especially important in hiring, onboarding, training, and performance management processes.  

Lencioni notes that these “human systems” give companies a framework to unify operations, culture, and management around organizational goals even when leaders aren’t there to remind them.

McKinsey’s researchers outline four “power practices” that, when successfully implemented, significantly influence organizational health.

1. Strategic Clarity
   Similar to Lencioni, McKinsey advises leaders to translate their company’s vision and strategy into actionable, measurable objectives and articulate and share them with every employee.
   
   
2. Role Clarity
   Ensure each team member understands their role and develop processes and working norms that empower and help them succeed.

3. Personal Ownership
   Hire and develop managers who hold themselves accountable for their work and who coach their team members to do the same.

4. Competitive Insights
   Understand their company’s value proposition and how they measure up in the marketplace. Use these insights to make strategic decisions.

McKinsey recommends that leaders evaluate their companies’ strengths and weaknesses in these areas and take necessary action to ensure their organization’s health.

Building organizational health takes time, and it can seem overwhelming to leaders dealing with the onslaught of issues that bubble up every day. However, commitment to creating the structures and culture that enable sustained health is one the best investments a leader can make. Doing so will establish a power base that enables consistent high-level performance, resilience, and profitability.