Neglect Organization Health and Risk Becoming Another– Enron: Focus Exclusively on ‘Performance’ and Risk Long-Term Success…

Organization Health is Critical for Business Success: “Organizational health is about adapting to the present and shaping the future faster and better than the competition.

Healthy organizations don’t merely learn to adjust themselves to their current context or to challenges that lie just ahead; they create a capacity to learn and keep changing over time. This is where ultimate competitive advantage lies.”

How healthy is your organization (how is it ‘really’ doing)? Sure, there are basic metrics like; total revenue, profit margin, employee turnover… which can paint at least part of the picture.  However, all of these measures have one inherent flaw: they measure  things  which have already happened. In book ‘Mastering the Rockefeller Habits’ by Verne Harnish writes; there are four interlocking principles that drive growth and good health. When taken individually, each of the principles: people, strategy, execution and cash, are good business practices.  A focus on any one of them will create a tighter more harmonious business.

Together they interlock to create a business in good health and poised for growth and sustainability; no matter what is going on in the economy. Since the publication of two landmark books, ‘In Search of Excellence’ by Tom Peters and Robert Waterman, and ‘Built to Last’ by Jim Collins and Jerry Porras; 20% of the companies profiled in these books no longer exist and 46% are struggling to regain their former positions in the marketplace.

Clearly, it’s a tough world out there, and it’s not getting easier to find sustained success. The book ‘Beyond Performance’ by Scott Keller and Colin Price, both at McKinsey, tackles this topic by looking at what is done by companies that have found ways to endure. According to Price and Keller; “health is the capacity of the organization to compete not only today, but tomorrow,” and there are three key elements:

  • Organization alignment: Does the organization know where it’s going? Are the people within that organization aligned about that direction? That may sound simplistic, but in many organizations it’s not the case. There isn’t a deep level of alignment around purpose and mandate from the leaders all the way to the frontline employees that make a difference to customers.
  • Capacity for execution: This is the ability to turn ideas into action. How much interference is there? How much complexity slows a company’s metabolic rate?
  • Capacity for renewal: Is the organization changing at or just above the rate at which it’s changed in the past? Or is the organization really focusing on changing at the rate required by the industry?

In the article “Characteristics of a Healthy Organization” by Rose Johnson writes: Companies should periodically take an assessment to measure their health. For companies to achieve long-term success, they must create and maintain healthy environments in the workplace. Healthy organizations understand that it takes a collaborative effort to compete in their market segment and produce continuous profits.

Healthy organizations have certain characteristics ingrained in their corporate culture: A healthy organization shares its business goals with employees at every level of the organization. Management shares goals with employees and gets them on board with the mission and vision of the organization. Healthy companies know how to develop teams that collaborate to achieve common goals.

Good leadership is one of the main characteristics of a healthy organization. Employees have good relationships with management that are based on trust. Managers know how to get employees to function together. When correction is needed, employees readily accept the constructive criticism offered by leaders. Companies confront poor performance instead of ignoring it.

Upper-level management values the input of employees who make suggestions on how to improve productivity and achieve high performance rates. Healthy organizations understand the risks they are open to and take the necessary steps to protect themselves against them. Healthy organizations know how to recognize and seize good opportunities.

They also know how to adapt to technological or operational changes. They try to stay ahead or inline with changes in the industry and business environment. Companies possess a sense of order and organizational structure. The structure and order of the organization does not limit innovation and growth…

In the article “Building a Healthy Organization in Challenging Times” by Patrick Lencioni writes:  The current state of the economy has caused many of us to question what we can do in this market to succeed. Now that most companies have cut staff and minimized any extraneous expenses, the question remains, ‘what else can we do?’

New York Times best-selling author, Patrick Lencioni, claims that most companies have enough organizational intelligence, intellectual property and human capital to succeed, even in a down economy. Unfortunately, many fail to leverage those assets because they lack something he calls ‘organizational health.’

He defines a ‘healthy organization’ as one where internal confusion and politics are minimized and an atmosphere of clarity and employee productivity can flourish. Built upon his model in the book ‘The Four Obsessions of an Extraordinary Executive’ helps leaders understand the disarming simplicity and power of organizational health and reveals the four actionable steps that allow them to achieve it:

  • Build and Maintain a Cohesive Leadership Team: Cohesive team trusts one another, engages in constructive conflict, commits to group decisions and holds one another accountable.
  • Create Organizational Clarity: Healthy organizations clarify topics such as values, strategies, goals and roles & responsibilities.
  • Over-Communicate Organizational Clarity: Healthy organizations align their employees by repetitively and comprehensively communicating all aspects of organizational clarity.
  • Reinforce Organizational Clarity Through Human Systems: Organizations sustain their health by establishing simple structures around the way they make decisions, evaluate job candidates, manage performance and reward employees.

In the article Management Vs. Leadership in a Healthy Organizational Culture by Jason Gillikin writes: Healthy organizations balance leadership and management to improve the bottom line. The tension between management and leadership can be hard to cut through at times, but in a healthy organization, the roles and duties of leaders tend to mesh well with the roles and duties of managers.

Both leaders and managers have functions that sometimes overlap, but through solid communication and a well-accepted strategic vision, these two roles work seamlessly in a high-performing organization. In a healthy organization, managers will accept the strategic direction shared by the leadership team and find ways to carry it out.

Leaders will communicate clearly and honestly, and establish clear milestones. Managers will accept direction from leaders and add to it, adding the muscles and sinews of operational effectiveness to the bones of strategic vision. In turn, managers will honestly communicate successes and failures to the leadership team, to help keep the vision in sync with reality. In a poorly performing organization, the relationship between leaders and managers breaks down.

Leadership might fail to articulate a clear vision, or to communicate new priorities to managers. Managers, in turn, might tell leaders what they want to hear without actually working to achieve the vision–or, the management team might simply be inept. Without a solid, symbiotic relationship between leaders and managers, a business cannot maintain a healthy organizational culture.

In the article “Essentials for an Effective, Sustainable, Healthy Organization” by Fredia Woolf writes: What’s the point of any organization? “To make money,” says the businessperson.  “To fulfill our mission,” says the non-profit person.  And so begins the false debate that keeps the two worlds separate and often leads to missed opportunities and wasted potential. 

If all organization leaders recognized that both financial viability and an inspiring mission are essential, they could then focus on the key levers that would make their organization effective, sustainable and healthy, thus transforming experience of work for so many people, which, in turn, would transform the performance and results of the organizations they serve. Here are some guidelines for how to do this:

  • Leadership Ability and Commitment: At the heart of every successful organization lie the quality, competency, vision and drive of its leader or leaders.  The culture, tone and nature of the environment stems from choices they make and priorities they favor.
  • Strategy: Organization leaders who have a clear strategy understand where they are going and what they want to achieve.  If the time is taken to align individuals with this strategy and to use the strategic priorities as a way to remember what’s important, you will have the makings of a productive, efficient organization.
  • Communication from and Visibility of Senior Leaders: Highly capable leaders who craft a brilliant strategy and stay in their offices or out of sight will not create high performance or healthy organizations. It is a primary function of leaders not only to be the voice of the organization to the outside world but also to keep their people ‘in the loop’ by updating, including and recognizing them.
  • Accountability: Building a sense of personal responsibility is part of a healthy culture.  Setting goals and clear expectations about roles and responsibilities is fundamental to a performance culture.  Setting limits, boundaries and clear expectations gives necessary structure and order and facilitates the accomplishment of goals.
  • Remove Structural Impediments: In some organizations, effectiveness is not impeded by people’s attitudes or practices.  It may, instead, be hampered by structures intrinsic to the organization.
  • Creating a Sense of Team and Trust: The three T’s of a successful 21st century organization are: Technology, Technical Expertise, and Teamwork.
  • Focus on Coaching/Development: Seeing each employee as an asset filled with potential and talent and whose passion and needs can be met by their work fosters a worker whose output can benefit the organization financially and existentially

If you were asked about the health of your organization, you would probably respond with financial measures such as; revenues, profitability, return on investment… According to Bradley Norris, these measures may or may not be correlated to durable adaptable companies. Examine any top 100 list from years past: Fortune’s top 100 best places to work or the Forbes 100.

Very few of these companies have endured the changes inherent in markets, industries, and society. In Andy Grove’s book, ‘Only the Paranoid Survive’ he states: “We must be ever vigilant, never-resting on the laurels of yesterday’s success. We must always worry that a competitor will satisfy the customer better tomorrow, if not today.” The healthy organization combines this fear with a faith in their ability to prevail, to win, to profit, to endure…

“Organizational health and corporate culture are the most important drivers of results… they are clear predictors of financial health… organizational health drives performance.”